How do I calculate landlord cash flow in the UK?

UK landlord cash flow = Monthly rent × occupancy rate − Mortgage payment − Letting agent fee − Monthly maintenance allowance − Insurance − Any bills paid by landlord − Void provision − Other costs. For the after-tax cash flow, you must also account for the Section 24 tax adjustment: under Section 24, mortgage interest is no longer fully deductible from rental income for individual landlords. Instead, taxable profit is calculated as rent minus running costs (excluding mortgage interest), and a 20% tax credit on mortgage interest is applied. For higher-rate taxpayers, this results in a higher effective tax bill than under the old rules.

What is Section 24 and how does it affect landlord cash flow?

Section 24 of the Finance Act 2015 (fully in force since April 2020) restricts the mortgage interest deduction for individual landlords. Before Section 24, landlords deducted mortgage interest from rental income before calculating their tax bill. Under Section 24, landlords can no longer deduct mortgage interest — instead, they receive a 20% tax credit on the interest paid. For basic-rate (20%) taxpayers, the net effect is broadly the same. For higher-rate (40%) taxpayers, the effective tax on mortgage interest rises from 40% to 20% of the gross interest, significantly increasing the tax bill and reducing after-tax cash flow.

What is the break-even rent for a landlord?

The break-even rent is the minimum monthly rent required to cover all costs and produce zero cash flow — neither gaining nor losing money each month. It is calculated by summing all monthly costs (mortgage interest or payment, management fees, maintenance, insurance, voids, and other costs) and solving for the rent level that covers those costs. For a mortgaged landlord at 75% LTV with a 5% rate, the break-even rent is typically 1.3–1.5 times the monthly mortgage interest payment, depending on running costs.

Cash Flow Calculator for Landlords UK 2025 | Section 24

Landlord cash flow calculator

Works for single let, HMO, and any UK rental property. Includes Section 24 tax calculation.

Property & mortgage

Mortgage loan outstanding

Mortgage interest rate

Mortgage type

Tax rate

Monthly income

Monthly rent

Expected occupancy

95% = ~3 weeks void per year

Monthly costs

Agent management fee

Of rent collected (inc. VAT). 0 if self-managed.

Monthly maintenance

Annual budget ÷ 12. ~1% property value p.a.

Monthly insurance

Monthly bills (landlord-paid)

HMO only — 0 for single let

Monthly service charge

Leasehold only

Other monthly costs

Accountancy, licensing amortised, etc.

Pre-tax monthly cash flow

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After-tax monthly cash flow

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Monthly profit & loss

Section 24 mortgage interest restriction — impact on your tax bill

Pre-2017 rules (old)

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Tax paid per year
Mortgage interest fully deductible

Section 24 (current rules)

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Tax paid per year
Only 20% credit on mortgage interest

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Monthly break-even rent

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Sensitivity — after-tax monthly cash flow

Rows = rent change. Columns = mortgage rate. Current deal is highlighted.

12-month cash flow projection (with seasonal void modelling)

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Section 24 explained — why your tax bill is higher than you think

Section 24 of the Finance Act 2015 is the single biggest change to UK landlord taxation in a generation. Before April 2017, individual landlords deducted their mortgage interest from rental income before calculating their tax bill — the same treatment as any other business expense. Under Section 24, fully phased in by April 2020, mortgage interest is no longer deductible from rental income.

Instead, landlords receive a 20% tax credit on mortgage interest paid. For a basic-rate (20%) taxpayer, the effective tax treatment is broadly unchanged. For higher-rate (40%) taxpayers, the impact is severe:

Old rules: Higher-rate landlord pays 40% tax on (rent − mortgage interest − running costs)
New rules: Higher-rate landlord pays 40% tax on (rent − running costs), then receives a 20% credit on mortgage interest — effective tax rate on interest is 20% instead of 0%

For a higher-rate landlord with £12,000 annual rent, £8,000 mortgage interest, and £3,000 running costs: the old rules produced a tax bill of £400 (40% of £1,000 taxable profit). Under Section 24, the tax bill is £1,800 (40% of £9,000 taxable profit minus £1,600 mortgage credit) — a fourfold increase. This can turn previously profitable properties into cash-flow losses for higher-rate taxpayer landlords.

The main alternative is to hold property in a limited company, where mortgage interest remains fully deductible as a business expense. Corporation tax (25% for profits above £250,000, 19% below) applies instead of income tax, and the mortgage interest restriction does not apply. The trade-off is extraction costs when drawing profit from the company.

Frequently asked questions

How does Section 24 affect basic-rate landlords?

For basic-rate (20%) taxpayers, Section 24 produces broadly the same outcome as the old rules because the 20% tax credit on mortgage interest equals the 20% tax that would have been paid on the deductible interest. The main risk for basic-rate landlords is being pushed into the higher-rate bracket by rental income — because rental income is now calculated before deducting mortgage interest for the purposes of working out total income, some landlords find their gross income (salary + rental income before deductions) pushes them above the basic-rate threshold, resulting in higher-rate tax on the rental income despite their salary income being below the higher-rate band.

Should I move my properties into a limited company?

For higher-rate taxpayers with significant mortgage debt, a limited company structure can meaningfully improve after-tax cash flow. Corporation tax is currently 19–25% versus 40% income tax, and mortgage interest remains fully deductible. However, there are significant practical considerations: transferring existing personally-held properties to a company typically triggers stamp duty (at full BTL rates plus 5% surcharge) and potentially capital gains tax on the transfer — making it expensive for established portfolios. New purchases going directly into a company are generally more straightforward. Always take specialist landlord tax advice before making this decision.

What is the break-even rent and why does it matter?

The break-even rent is the minimum monthly rent that covers all costs and produces zero cash flow. It matters because it shows you how much rental headroom you have — the gap between your actual rent and break-even. If your rent is only £50/month above break-even, a void of two weeks or a modest rent reduction (at re-let) turns the property loss-making. A larger gap — £150–£200+/month above break-even — provides a meaningful buffer against rent reductions, rate rises, or unexpected costs. Properties with little headroom above break-even should be considered carefully before purchase or at remortgage.

How should I use the sensitivity table?

The sensitivity table shows your after-tax monthly cash flow at different combinations of rent and mortgage rate. Read it by finding where your current rent row and current mortgage rate column intersect — that is your current position. Then look at adjacent cells: what happens if you need to re-let at 10% lower rent at renewal? What happens if your fix ends and rates are 1% higher? This shows whether your cash flow remains positive under realistic stress scenarios — an essential check before any property purchase or refinance.

Related calculators

Disclaimer Tax calculations are simplified estimates and do not account for all individual circumstances. Section 24 and other tax rules are complex — always consult a qualified accountant or tax adviser before making decisions based on these figures. This tool does not constitute financial or tax advice.

About the author

Kelvin Peltier

Retail leader, entrepreneur and founder of Poqet.io.

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✓ Editorially reviewed — all Poqet guides are checked for factual accuracy before publication and updated when UK rates or legislation change. Editorial Policy